Question

On January 1, 2018, the stockholders’ equity section of Nance Corporation shows: Common stock ($2 par value) $1,200,000; paid-in capital in excess of par value $2,500,000; and retained earnings $1,000,000. During the year, the following treasury stock transactions occurred.
Mar. 1 Purchased 30,000 shares for cash at $22 per share.
Jul. 1 Sold 6,000 treasury shares for cash at $27 per share.
Sept. 1 Sold 5,000 treasury shares for cash at $19 per share.
Dec. 1 Sold 5,000 treasury shares for cash at $12 per share.

Prepare the journal entries.

Answer 1

Explanation:

Date                             Particulars                                  Debit            Credit

Mar.1           Treasury Stock (30,000*22)                      660,000

                              Cash                                                                     660,000

Jul.1              Cash ( 6,000*27)                                        162,000

                           Paid in Capital from Treasury Stock                       30,000                

                           Treasury Stock (6,000*22)                                     132,000

Sep.1            Cash (5,000*19)                                             95,000

                    Paid in Capital from Treasury Stock             15,000

                              Treasury Stock (5,000*22)                                  110,000  

Dec.1            Cash (5,000*12)                                             60,000  

                    Paid in Capital from Treasury Stock             50,000

                              Treasury Stock (5,000*22)                                  110,000  

Note: When company sold out the Treasury Stock more than its purchase price, the Paid in Capital increases from Treasury Stock and recorded as credit. However, when company sold Treasury Stock less than its purchase price, the Paid in Capital decreases from Treasury Stock and recorded as debit.